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The Yahoo Patent Portfolio: What is the market price today?

Business Insider reports that Yahoo’s patent portfolio could generate up to $3B. We disagree and we use data to show why. With an estimated street price of $772M (high of $1.15B, a low of $393M), Yahoo has a valuable asset, just not a $3B asset.

We often see patent prices stated without any data to back up the analysis. We think this needs to change. Below, we show how a quick analysis of Yahoo’s portfolio and the patent market leads to some bounds on the street price of the patents.

Note, this estimate is not comprehensive. There are a number of factors to consider that we have not included. Do not rely on the estimate for investment purposes.

Yahoo’s Patent Portfolio

Although Yahoo does not appear to report out their total patent assets, a search of Thomson Innovation reports Yahoo as having 2187 US issued patents. Thomson shows Yahoo’s worldwide patent assets at 9329, including 4296 worldwide patents.

Yahoo’s portfolio is sizable and in an important technology field (the earlier days of the internet). Additionally, Yahoo had been on an extended company buying spree in the early 2000’s, snapping up pioneering companies and their patent portfolios.

Yahoo has also been able to hire some of the best patent development teams in the industry. Previous teams helped start RPX and other patent monetization companies. The current team includes members with decades of successful patent development and monetization experience at places like IBM.

These are all good things that would lead you to believe that Yahoo’s portfolio may result in a $3B payday for Yahoo. But the real question is what is the portfolio priced at today on the open market.

Not Your Mother’s Patent Market

We regularly report on the market price of patents. (See and download our latest market report for all the data.) The market is changing quickly. Our data says that the market is down well over 60% from four years ago, and continues to decline. Not dead by any stretch, but not anywhere near what it was four or more years ago.

You can see some of the declines in the publicly reported deals. In 2011, Nortel’s portfolio sold for $4.5B. Two years later, Kodak’s was expected to sell for well over $1B; it sold for $527M. This is not an apples-to-apples comparison, but the important thing is that expectations and reality diverged and we believe that expectations continue to diverge.

What’s the Street Price for Yahoo’s Portfolio?

Let’s assume that Yahoo’s entire portfolio was broken up and sold out onto the open market. What might they get for it? With 9329 assets, we would expect a high asking price around $1.8B. However, on a per issued US patent basis, the asking price would be $605M. We typically discount the seller’s asking price by 35% resulting in street prices between $1.15B and $393M. That is a big spread, but in neither scenario did we get anywhere near $3B. These numbers also assume that every asset sells (see the market report for more information on sales rates).

How do you reconcile the spread between the US issued patent and the all patent asset prices? Yahoo’s portfolio has a higher number of international assets and pending patent applications, increasing the per asset estimate. However, the per issued US price would be too low because of the higher number of other patent assets. For this analysis, the midpoint between the two is a reasonable starting place at $772M.

What Big Factors Could Impact This Price?

In addition to having many internet patents, a strong internal team, what else might impact the price for good or bad?

Overall strategic value. For a potential patent portfolio buyer, Yahoo’s patents may be what’s needed to enter the US market. Imagine a scenario where until now, a company has not entered the US consumer electronics market for fear of patent attacks from Apple and others. Yahoo’s portfolio may very well be the patent boost needed to defend against those attacks.

Yahoo has done well at selling patents. Yahoo’s latest 10K (annual SEC report) does not list the number of patents sold, but it does show proceeds from patent sales. 2013-2105 were $80M, $87M and $29M respectively. Note, 2015 was the lowest year of the three. By any standard, these are strong sales numbers. Yahoo’s internal team has been busy and effective.

Yahoo may show greater adoption/use of their patents. We found that if Yahoo can show greater overall adoption of their technologies (more companies are infringing), they have the opportunity to demand a premium price (up to 25%).

The 2014 US Supreme Court’s Alice decision gutted business method patents and damaged many software patents. Yahoo is not immune to the negative impact.

We did not include an estimate for no-sales. Many patents on the market never sell; it’s reasonable to include a discount for the chance of some of the patent not being sold (not being considered valuable enough to sell). The discount for potential no-sales can be significant, up to 70%.

Per-asset prices usually decline when adding more patents to a deal. The blue line of the figure below shows that as the number of assets increase (x-axis) in a potential patent deal, the price per asset tends to drop (y-axis.

Conclusions and Thoughts

We are often frustrated by wild or anecdotal reports of patent prices and sales. Business decision makers seek real data to support informed patent buying, selling and pricing. We think our industry needs more data and more analysis. Board members, CEOs, CFOs are all looking for Intellectual Asset Management guided by both experience and data. Wild projections on patent values hurt us all; data-driven decision making brings business credibility to the industry of Intellectual Asset Management. Our goal in putting this post together was not to show that Yahoo’s portfolio should be a specific price. Our goal was to show that with a few pieces of data, the price can be bounded and the factors impacting that price understood.

At $772M, Yahoo’s patent portfolio is a valuable asset. But, this is just an estimate of the street price of Yahoo’s patents. The important point for investors and potential purchasers is that market data can help you understand how to think about the price of Yahoo’s portfolio, what additional questions you might have when evaluating it, and where to look for more information.

The Author

Kent Richardson
counsels clients on a variety of patent and business matters including patent buying, selling, licensing, valuation, prosecution and operations. Kent has licensing and marketing patent portfolio experiences resulting in more than $600M of patent license bookings. Kent has served as an expert witness on patent monetization and licensing practices in cases in England and the United States. Prior to founding the ROL Group, Kent was the General Manager of ThinkFire Services USA, Ltd’s Silicon Valley office. Kent has worked in various senior management roles with such growth businesses as Sezmi, Constellation Capital, Rambus, Numerical Technologies. Kent is a member of the California Bar and a United States Patent and Trademark Office registered patent attorney, and holds five US patents.

Erik Oliver
counsels clients on patent, licensing and trademark matters. He brings more than ten years of patent prosecution, litigation, and licensing experience and a track record of millions of dollars in both patent and technology licensing deals. Prior to founding the ROL Group, Erik was a Vice President at ThinkFire Services USA, Ltd’s Silicon Valley office. Erik has held various senior positions with a range of responsibilities at Rambus Inc., Synopsys, Inc., and a number of Silicon Valley startups. Erik is a member of the California and District of Columbia Bar and a United States Patent and Trademark Office registered patent attorney.

Michael Costa
acts as the ROL Group's financial, engineering, and market analyst. His background in engineering and consulting allow him to bring a blend of business knowledge and technological understanding to our clients. Prior to joining the ROL Group, Michael worked as an independent financial and strategy consultant for Silicon Valley startups. He has helped companies analyze their business and technology opportunities in crowdfunding, mobile advertizing, home automation, green systems and power management, InGaAs semiconductors, and digital signal processing.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments.

angry dudeApril 15, 2016 2:20 pm

How bout zero, zilch, nil ?

Just try to enforce those patents in the current environment – they’ll laugh you out of courtroom

I doubt they have a single enforceable patent in the entire junk portfolio

Paul F. MorganApril 16, 2016 10:32 am

Just a couple of additional thoughts. First, if Yahoo has already been actively selling [or licensing] its patents, as indicated, there is the possibility that they were selectively picked out by purchasers as being more enforceable patents, thus impacting the average value of the rest. Secondly, given the industry they are in, the kind of patents obtained in past years are statistically far more likely to have claims with Alice-101, IPR and/or CBM vulnerabilities when enforced than patents from other industries. [But being older helps somewhat for the latter two by reducing the pool of prior art patents or publications.]

AnonApril 16, 2016 11:04 am

The “Alice-101″ Gist/Abstract sword levels all of their portfolio down to a value of “zero, zilch, nil” as stated aptly by angry dude.

One question that remains a bit unsatisfactorily analyzed is when will this realization result in a truly massive restatement of value from a corporate and stock transaction viewpoint?

Surely, given how meteoric a rise in value entire sectors of the economy were related to non-tangibles (like IP), – and NOT just in computer or software related arts – but nearly universal, given the ubiquity and penetration of software into nearly all modern advances** – there must be a matching – or more likely more than just a matching – crash.

The full ramifications of applying the limitless Gist/Abstract sword have not even begun to have been felt.

**as a certain pundit (Greg Aharonian) who publishes emails rather than blogs has pointed out, software advances have made ALL chemical advances into nearly a state of de facto obviousness.

In all of the lower court views (and including the recent dismissal of the Office guidance as basically having NO saving grace), I have seen nothing to change my opinion that stomping on the gas pedal of what the Supreme Court has provided is the only way to wake up Congress and for Congress to take action in a 1952 redux and once and for all remove the Supreme fingers from the nose of wax that is 101.

angry dudeApril 16, 2016 8:02 pm

Anon @3

“One question that remains a bit unsatisfactorily analyzed is when will this realization result in a truly massive restatement of value from a corporate and stock transaction viewpoint?”

Good point, and it was brought up many times before, e.g. see Erich Spanderberg’s patent predictions for 2015:

“Business Impact – GAAP Write-downs
All of the above factors – patent reform at both the legislative and judicial levels, the Supreme Court weakening patents, and IPRs – are part of a process that’s reducing the value of patents in a dramatic fashion. These aren’t just obscure issues that only a patent nerd could love – they’re real issues that have a major effect on the entire intellectual property ecosystem.

It may not have been the goal of Congress and the Supreme Court, but the combination of the AIA and recent Supreme Court decisions, especially Alice, have had the effect of wiping out billions of dollars of value in patents, especially software patents. If some of the more recent 101 (what is patent eligible) decisions are upheld, we are only beginning to understand what Alice means.

In our blog post from back in August, “Patents, GAAP, and Balance Sheets,” we talked about how the environment has changed in a way that damaged the value of many patents, and we asked

Given these dramatic changes, why haven’t we seen major write-downs of the acquired patent assets of large corporations? There are many, many patents whose value has been impaired by these issues, yet the problem remains invisible to the investor community.

Expect the investor community to finally notice. I expect to see the first lawsuits filed for failure to write down the value of patents that were purchased or that are on the books as part of an acquisition. If an acquisition any time in the last few years resulted in a significant allocation to software patents, those assets aren’t worth now what was paid for or allocated to them then – and the companies have been hiding or ignoring that fact. Reality will hit soon.”

But…we still live in this artificial world, at least as far as patents are concerned..

US Patent System is dead and it’s starting to smell like a dead body … but it’s going to take another 5 to 10 years until this smell is sensed by the rest of the population not directly involved in this mess
But it will be too late by then
Amen , brothers…

Stephan CurryApril 16, 2016 9:30 pm

angry dude@4
US Patent System is dead and it’s starting to smell like a dead body … but it’s going to take another 5 to 10 years until this smell is sensed by the rest of the population not directly involved in this mess
But it will be too late by then
Amen , brothers…

Let’s all thank the deceiving Eve and her band of fallen angels for bringing down humanity.
I predicted this meltdown in year 2007.
but I will still say, Glory to Jesus, it will all work out for the best. Amen, brothers…